Arbon, 27 February 2024 – The Board of Directors has received several unsolicited expressions of interest in purchasing the Climate (formerly HVAC) Division, prompted by comparable transactions in the market. After careful consideration and with a view to sustainably increasing the value for shareholders, the Board decided to carry out a structured sales process with several strategic prospective buyers. Upon conclusion of a possible transaction, the Board of Directors intends to return a significant share of the proceeds to the shareholders, in addition to reducing debt. At the same time, the remaining Doors Division is to be strategically developed as well as further strengthened through targeted acquisitions.

The Arbonia Board of Directors has received several unsolicited indications of interest in purchasing the Climate (formerly HVAC) Division and has subsequently decided to carefully review them with the involvement of investment banks. The process and the negotiations with several strategic potential buyers are currently at an advanced stage.

The valuation of the Climate Division used for the negotiations is based on market-standard EBITDA transaction multiple for a company operating in the heating, ventilation and air-conditioning sector.

The Board of Directors intends to provide the shareholders with a significant share of the sales proceeds of the Climate Division upon completion (closing) of a possible transaction. When the possible transaction is completed and the proceeds from the sale are received, expected for the second half of 2024, the Board of Directors would invite shareholders to an Extraordinary General Meeting, which would vote on the instruments for returning funds to the shareholders. Due to the ongoing negotiations, the Board of Directors has also decided to request the distribution of an ordinary dividend for the financial year 2023 at such an Extraordinary General Meeting.

Upon completion of the transaction, Arbonia would completely focus on the doors business and implementing the adopted strategy. The division continues to work towards the goal of expanding its leading position as a Central and Eastern European supplier of wooden doors and glass solutions. Based on the largely completed, comprehensive investment programme for increasing capacity and productivity as well as by increasing market shares in its domestic and neighbouring target markets, the Arbonia Doors group is aiming for above-average market growth in the future. Building on the investments made and with the aid of digital solutions, the Arbonia Doors group is positioning itself as an innovative full-range supplier and cost leader.

The Doors Division would use the sales proceeds that remain following debt reduction and the return of funds to shareholders to accelerate the further development of its business. Firstly, it will continue growing organically and, secondly, make acquisitions that will help it establish a broader position both geographically and with regard to product variety.

Without currently knowing if and when the negotiations will lead to a transaction, the relevant IFRS guidelines (IFRS 5) require the Climate Division to be recorded as a discontinued operation in the consolidated financial statement as soon as a sale is classified as highly probable. At the same time, it is important to note that the full holding costs are allocated to the continuing operating activities, which leads to increased expense items and negatively affects the profitability figures.

Financial figures for continuing operations for 2023

In the financial year 2023, Arbonia was confronted with a historic slump in the construction industry in most of its core markets, which resulted in a volume decrease of up to 30% for its products in individual markets. In addition to inflationary increases in construction costs and sharp rises in interest rates, the construction industry was also subjected to uncertainties in Germany, culminating in the divisive negotiations within the “traffic light“ coalition government regarding the German Buildings Energy Act (GEG).

Revenue of the continuing operations decreased in the financial year by 9.2%, from CHF 555.9 million to CHF 504.6 million. Without currency and acquisition effects (organic), the decrease in revenue amounted to 8.2%. EBITDA without one-time effects fell from CHF 53.3 million to CHF 34.0 million, corresponding to a decrease of 36.3%. EBITDA with one-time effects fell by 36.2% to CHF 31.7 million (previous year: CHF 49.7 million). Accordingly, the EBITDA margin (without one-time effects) fell from 9.6% to 6.7%; including one-time effects, the EBITDA margin amounted to 6.3%, compared with 8.9% in the previous year. The one-time effects amounted to CHF 2.2 million net on the EBITDA level and were mainly due to personnel measures in connection with changes made to production capacity. In continuing operations, EBIT without one-time effects fell from CHF 16.2 million to CHF –6.6 million. EBIT with one-time effects amounted to CHF –8.9 million, after CHF 12.4 million in the previous year. The corresponding EBIT margin without one-time effects fell from 2.9% to –1.3%; with one-time effects, it decreased from 2.2% to –1.8%. The group result from continuing operations without one-time effects amounted to CHF –12.5 million, compared with CHF 3.2 million in the previous year. The group result with one-time effects amounted to a total of CHF –14.2 million (previous year: CHF 0.5 million). The group result from discontinued operations after taxes amounted to CHF –3.0 million, which led to a group result of CHF –17.2 million in total. [1]

Compared to the previous year, the cash flow from operating activities of the group substantially increased by CHF 126.8 million, from CHF –25.8 million to CHF 101.0 million. This was due to the CHF 34 million reduction in net working capital, which over-compensated higher interest charges. Both divisions contributed to this positive effect. Both divisions achieved positive cash flows from their operating activities. Decreasing investments of CHF 93 million, which corresponds to an investment rate of 8.6% compared with 12.4% of the revenues of the continuing and discontinued operations in the previous year, the payment of the purchase price for Interwand, the shareholding increase in KIWI and deferred payments for acquisitions, led to a free cash flow of CHF 2.4 million. This would have been significantly higher if there had been no semi-finished and finished products and materials totalling more than CHF 20 million in stock at the end of the year due to the slump in demand for heat pumps.

The net debt increased to CHF 209 million at year-end, from CHF 184 million in the previous year. A free cash flow of CHF 2.4 million was countered by the payment of the dividend (CHF 20 million), the purchase of treasury shares (CHF 3 million) as well as an increase in leasing liabilities. At the end of the year, the leverage ratio was 2.3x (without one-time effects) or 2.9x, taking into account all one-time effects. A mortgage financing in the amount of CHF 15 million was set-up as announced in order to independently finance the investment property in Arbon. As of year-end, the shareholders' equity was CHF 921.0 million, which corresponds to an extremely stable equity ratio of 62.1%.

Outlook
Arbonia expects a challenging environment in its core markets in the financial year 2024 as well. Despite improving external factors (decreasing inflation and interest rates as well as lower material and construction costs), Arbonia does not anticipate any increase in new residential building activity in Central Europe in 2024. Only in the renovation sector could a recovery start in the course of the year.

Due to the wide product and country mix as well as a significant share of commercial and public construction, Arbonia expects organic growth in the Climate Division, while the Doors Division should end up at the previous year's level. The profitability (EBITDA) of the Climate Division is set to increase further as a result of revenue growth and additional cost optimizations. In the current year, the Doors Division is benefiting from the consistent implementation of the cost-savings measures it started in 2023 as well as the positive effect of strategic electricity purchasing; as a result, profitability is expected to increase compared to the previous year.

The detailed reporting can be found in the annual report 2023 in the chapters “Letter to the Shareholders” and “Divisions” as well as “Sustainability Report”; see www.arbonia.com/report2023.

Contact
Fabienne Zürcher
Head Corporate Communications & Investor Relations
T +41 71 447 45 54
fabienne.zuercher@arbonia.com